Federal law enforcement authorities show up at your company with a search warrant to search the entire premises of the business including computers, customer files, billing and accounts receivable information, internal memoranda, bank account information and training materials. They conduct an extensive search and seize a variety of materials from the business which leads to federal criminal charges against you, the company president, your vice president and the company itself. You retain a federal criminal defense attorney and attempt to have this evidence thrown out so it cannot be used against you in court because the search warrant was vague or overly broad, i.e. the search warrant was not limited to items for which there was probable cause to search and seize. Can you, the president of the company, challenge the search of your business? In most cases, the answer is no, according to a recent federal criminal case out of the U.S. Court of Appeals for the Ninth Circuit.
The Fourth Amendment to the Constitution protects citizens and companies against unreasonable searches and seizures. Fourth Amendment protections are realized in a couple of ways, one of which is the requirement that police and law enforcement authorities obtain a search warrant that must be signed by a judge before searching a person’s home or business. If the police obtain a search warrant, conduct a search of a business and seize evidence that results in criminal charges, a motion to suppress can be filed to suppress such evidence if it is determined that the search warrant was invalid, for instance because it was overly broad. The end result is that the evidence obtained pursuant to that invalid search warrant is thrown out and cannot be used against the defendant in the criminal case.
However, after a questionable search and seizure, a person or company can only move to suppress the seized evidence if he/she has standing. Standing relates to a person’s reasonable expectation of privacy in the place that is searched. A classic example is one’s home. Without legal standing, the judge will not even hear a defendant’s argument on a motion to suppress evidence. The question raised by this Ninth Circuit case, United States v. SDI Future Health, Inc., was whether a company president/part owner had standing to challenge a search of his business.
If you ask business owners if they have a reasonable expectation of privacy in the companies where they are the owners and/or executive officers, I would suspect that virtually all of them would say yes. However, the law sees it differently. In the SDI Future Health case, the president/part owner of the company, a second officer/part owner and the company itself were charged with health care fraud and tax evasion in federal court after federal law enforcement officers searched the entire business and seized a long list of documents covering every aspect of the business. After federal criminal charges were filed, each defendant’s criminal defense attorney filed a motion to suppress the evidence obtained in the search because the search warrant was overly broad and covered more materials than the authorities could substantiate based on the probable cause that supported the search warrant. In other words, each defendant sought to suppress evidence seized from their company because the search warrant was invalid. On the company’s motion, the Court agreed that the search warrant was overly broad, at least in part, and threw out some of the evidence that was seized. That evidence could not be used against the company in the criminal case.
But what about the two executives/part owners? The Court did not allow them to challenge the search and seize and did not hear their similar motions to suppress. The Court held that those two executives/part owners did not have standing to challenge the search and seizure because they did not have a reasonable expectation of privacy in their business premises with the exception of their own personal offices. As a result, even though the search warrant was flawed, all evidence seized pursuant to that search warrant could be used against the two company executives in their health care fraud and tax evasion case.
What does this mean for company executives? Based on this Court’s ruling, with the exception of a small, family-run business where the defendant exercises daily management and control of the business, a company executive does not have the right to challenge a search of his/her company premises in general. Even where he/she owns the company, he/she can only challenge a search of his/her business and seizure of items taken from his/her business if he/she can show a personal connection to the places searched and the materials seized. A company executive could challenge a search of his/her individual office, but it would be much more difficult to meet this “personal connection” standard for other areas of the office that are not kept private or secure or for things that are not within the immediate control of the executive charged with the federal crime.
As a result of this ruling, company executives should not assume that they have “a reasonable expectation of privacy”, as that phrase is defined under the law, in anything that is kept at the office. If the prospect of a federal investigation and/or a search of business premises is contemplated at all, company executives need to evaluate what items are kept on the company’s premises and whether they need to be kept there.